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India Insider: Pharma and Earning Trust Thru Accountability

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

India Insider: Pharma and Earning Trust Thru Accountability

The pharmaceutical industry in India is a global powerhouse, often touted as “best in class.” Nearly 32% of India’s pharma exports go to the United States, and India’s products are renowned for their quality and affordability. Giants like Sun Pharma, Cipla, Dr. Reddy’s and Mankind Pharma cater to millions worldwide. Mankind Pharma, in particular, is celebrated for selling affordable essential medicines, ensuring access for lower-income communities.

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The Opposite Side: A Fatal Flaw

Yet, within India, the same country with world class technology and research, exists a grim paradox: sub-standard drugs that have caused devastating human loss.

This is not a new problem. In 2022, toxic cough syrups made by two Indian companies were linked to the deaths of 70 children in The Gambia and 19 in Uzbekistan. According to the World Health Organization (WHO), the products contained excess levels of diethylene glycol (DEG).

A Killer Drug: New Tragedy 2025

The contamination has now hit home with horrifying consequences quite recently. As Frontline magazine detailed, in the Madhya Pradesh State, Rajesh Yaduvansi’s two-year-old daughter, Jayesha, was admitted to a local clinic on September 14th for pain and fever. After temporary relief, her condition worsened. By September 25th, doctors revealed her kidneys had stopped functioning. She was rushed to Nagpur, but tragically died on October 7th from acute kidney failure.

Jayesha was one of at least 24 children who has died since early September across Madhya Pradesh, mostly from Chhindwara and nearby tribal districts. Three more patients remain in critical condition. Most victims came from poor and tribal families. They are the victims of a lethal lapse in quality control.

The culprit was the toxic industrial solvent, diethylene glycol (DEG), which causes kidney failure when ingested. The contaminated cough syrup, Coldrif, was manufactured by Tamil Nadu State based Sresan Pharmaceutical.

Following the cough syrup deaths, authorities formed an SIT (Special Investigation Team) and raided the manufacturer, Sresan Pharmaceutical, near Chennai. The company’s owner, Ranganathan Govindan, has been arrested, and several Madhya Pradesh drug officials have been suspended or transferred.

The Solvent Issue: Cutting Corners

Cough syrups typically use propylene glycol as a solvent. This ingredient exists in two grades: industrial and pharmaceutical. The industrial version, which is cheaper, can contain dangerously high levels of DEG.

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When manufacturers prioritize cost cutting and fail to ensure pharmaceutical grade purity, tragedy follows. This is a profit driven decision that ignores human life and can produce fatalities.

Regulatory Failures and Neglect

India aims to reach developed nation status economy by 2047, but this ambition will ring hollow if it neglects its own people.

The drug control system is fractured. The Central Drugs Standard Control Organization (CDSCO) issues drug licenses, while State authorities are responsible for essential quality checks. In Madhya Pradesh, accountability rests with the Drug Controller and Food and Drug Administration.

The system is fundamentally broken. According to K.R. Ashokan, a former President of the Indian Medical Association (IMA), fewer than 1% of drugs are tested for quality or impurities. Indian citizens face massive risks which are often unreported. While a pharmacovigilance system exists, its national reach is minimal and desperately inadequate for a country of 1.4 billion people.

The Central Government health care expenditure remains under 2% of its GDP and this is far too little for a nation aspiring for global leadership in pharmaceutical research.

A Call for Accountability

This catastrophe has shaken parents’ trust in the medical system, especially among the most vulnerable communities. India has the potential to be a world-class player, but without strong, centralized regulation and comprehensive preventive care, such incidents will continue.

We cannot bring back the 24 children who died due to cough syrup poisoning. This tragedy must serve as a necessary wake-up call, because no parent should ever lose a child to medicines that are meant to heal again.

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India Insider: U.S Credit Crunch vs. Indian Banking Paralysis

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India Insider: U.S Credit Crunch vs. Indian Banking Paralysis

When the U.S suffered a severe credit crunch in the early 1990s, the triggers were clear: the collapse of the leveraged buyout (LBO) boom, commercial real estate price corrections, and the failure of Savings and Loans (S&L) Associations, created the need for a $160 billion taxpayer bailout. Regulators, determined to act tough, declared many banks undercapitalized. The result was a nationwide squeeze from 1991 to 1993, where capital shortages – not liquidity, froze credit markets.

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Reserve Bank of India Borrowing Rates 1935 to 2025

Fed Chairman Alan Greenspan slashed the Federal Funds rate to 3%, but banks couldn’t lend without capital. The unique twist was that, even as lending slowed, competition among borrowers pushed prime lending rates to 6%. This gave banks a fat 3–4% spread. Greenspan let this persist for nearly three years, enabling banks to earn profits equal to more than 10% of assets. With capital requirements at 8%, the windfall repaired balance sheets. By 1994, the U.S had exited the crisis and returned to strong growth.

India’s trajectory was very different. For decades, the country ran structurally high interest rates, which in theory should have allowed banks to recapitalize through spreads, just like the U.S. However, the reality was distorted by governance failures. Public sector banks (PSBs) , which dominate the system did not use their spreads to strengthen capital. Instead, politically connected lending to oligarchs and large industrial houses left the banks saddled with non-performing assets (NPAs).

I witnessed the aftermath up close in 2019 while working at Edelweiss Brokerage. Shadow banks were stressed, some private banks were crumbling, and PSBs were finally forced to acknowledge their bad loans. The selloff in the banking stocks were brutal that year, Catholic Syrian Bank’s IPO, one of the prominent South Indian banks went undersubscribed. To counter the slowdown, the government slashed corporate taxes from 30% to 22% to stimulate capital expenditure.

Unlike the U.S, India’s stress was on the asset side. Corporates were dragged into Insolvency and Bankruptcy Code (IBC) proceedings, where assets were monetized through painful restructurings. Piramal Finance bought DHFL at 30 cents on the dollar, and ArcelorMittal acquired Essar Steel at 90 cents. This was the hard clean up the system had avoided for years.

The NDA (National Democratic Alliance) government made the right call in restructuring the banking sector. Weak public sector banks were merged with stronger ones. Yes, it was costly. Households bore the burden via higher taxes, hidden charges, and high borrowing rates. But at least the problem was confronted.

The contrast is striking. The U.S endured a sharp three-year crunch, recapitalized its banks through spreads and market discipline, and bounced back quickly. India endured nearly a decade of paralysis, requiring taxpayer recapitalizations, corporate asset fire-sales, and systemic restructuring. The eventual stability allowed private sector banks to quietly capture market share from their weaker state-owned peers.

The lesson is simple: interest rate spreads can heal banks only if governance is strong. Without accountability, as India’s PSB saga shows, high rates merely tax households and businesses without fixing the system.

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India Insider: Why is Gold Frequently Accumulated by Indians?

by with No Comment AMT MarketsAssetsFeatured Highlights

India Insider: Why is Gold Frequently Accumulated by Indians?

In a society like India in which I live gold hoarding is a fact of life. According to a recent report by the World Gold Council, Indian households are believed to hold around 25,000 tonnes of gold with a combined value of around $3 trillion USD.

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Billionaire banker Uday Kotak applauded Indian women when he said they are ”the smartest fund managers in the world”. The precious metal has gained 42% in 2025 alone, and returned 700% in the last 20 years in Indian Rupee terms. In India consumers have a habit of monitoring daily gold prices. There is a gold festival in India called Aksayatritiyai, when gold is bought frequently in small grams but often also includes large purchases for religious sentiments. In Northern India, gold is bought during festival times like Dhanteras and believed to bring prosperity and good fortune.

It’s almost unthinkable for marriages to occur in India without gold. Many marriages have been postponed and even stopped if the requisite dowry is not given by a girl’s family. And there was a time in India when some families didn’t want to have a baby girl due to the excessive gold dowry they would be responsible for and have to give a boy’s family at the time of marriage. 

Adam Smith’s Case Against Gold:

Smith lashed out at gold for its lack of productiveness. He wrote in the The Wealth of Nations, “labour was the first price, the original purchase-money that was paid for all things. It was not by gold or by silver, but by labour, that all the wealth of the world was originally purchased; and its value, to those who possess it, and who want to exchange it for some few productions, is precisely equal to the quantity of labour which it can enable them to purchase or command.”

The act of hoarding, whether it is money or gold, depresses economic activity, as demonstrated by John Maynard Keynes in his ‘paradox of thrift’. Indeed, it was the Europeans by spending all the precious metals taken from the Americas which boosted economic activity, and ultimately sparked the rise of modern capitalism whereas Asians by hoarding ended up falling behind.

Ancient China Example:

In the past, China’s reliance on silver gave short-term stability but stunted long term growth. With no domestic silver, it depended on inflows from Spain and Japan, making its money supply hostage to global trade. Wars or disruptions cut silver inflows, draining liquidity while crippling tax collection. Unlike Europe, China clung to silver as ‘real’ money, while neglecting credit, banking and bonds. This rigid system weakened the nation’s fiscal capacity, leaving China unable to mobilize resources or industrialize effectively. In the end, silver ensured stability, but strangled flexibility and growth. Indian growth has been strangled too often because of an over-obsession towards gold.

Why Gold Prices are Moving Up?

The price of gold was relatively stable until the 2008 financial crisis and it’s been rising steadily ever since, doubling in 3 years from 2009 to 2012. After some broad consolidation, gold has been in a higher value band if you scrupulously study charts. Arguably, it is an influence due to lower interest rates that have helped gold prices move up for 15 years as inflation has been attempted to be camouflaged by Central Banks.

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Accumulation of Central Bank Holding of Gold into 2024

Central Banks also accumulate gold for many reasons. One reason for this are rising bond yields that make existing fiscal obligations underperform for governments. Central Banks buy gold to diversify and hedge against risk. As the Official Monetary and Financial Institutions Forum – an independent body – noted recently, many European national bank systems endure massive losses because of quantitative easing. When the institutions try to undertake quantitative tightening, they are forced to sell at market prices, which deepen their balance sheets losses. Thus, Central Banks diversify into gold as a sacrosanct hedge against losses incurred and allows them to offset many liabilities. Gold has a long historical track record of working as a safeguard against inflation.

It’s also true that gold is often accumulated by Central Banks when hedging against geopolitical uncertainty. The Russia and Ukraine war offers intrigue regarding the nation of Kyrgyzstan, which China uses as a route for its exports to Russia, this due to Kyrgyzstan’s inherent ability to conduct trade via accessible routes. There is high plausibility that Kyrgyzstan might be converting Russian Ruble surpluses into gold.

Monetary Policy Matters for Gold:

Gold will remain vital for many years to come as a store of value and a safe haven. Buying the precious metal delivers investors and businesses a needed hedge against inflation. Protections against the lose of purchasing power within their own fiat currencies remains important for all people.

The Indian public and other societies need to remember, the value of gold within their own currencies often lies within the interest rate valuations sparked by Central Banks mechanisms which sometimes amount to magic shows and influence demand. While public buying of gold is important, it sometimes equates into mere speculation and does not always help economic activity.

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India Insider: Speculation, IPO Mania, and Capital Erosion

by with No Comment AMT MarketsFeatured HighlightsIndia

India Insider: Speculation, IPO Mania, and Capital Erosion

A speculative frenzy is reflected nowadays via India social media around quarterly results and IPOs. Animated talk about investment potential in India can be compared in some respects to the Dot-com bubble in the U.S which grew in stature into the late 1990’s and peaked in March of 2020 before imploding. Retail speculators in India rush into untested technology stocks hoping for quick profits, often without understanding the businesses. Avoiding a Dot-com like crash is important.

Hedge funds and institutions with their superior supply of capital often speculate across stocks, bonds, Forex and commodities as part of their strategies. However, retail investors should only purchase individual corporate stocks like pieces of businesses which they want to own when they have the ability. Market fluctuations lower can be used to buy quality companies when intrinsic value has been discounted allowing investors with limited funds to take advantage of stock volatility.

Charlie Munger, the right hand man of Warren Buffett, when asked what the secret of running Berkshire Hathaway Inc. was replied, “Warren likes to say, just tell us the bad news, the good news can wait. So people trust us in that (decision making process), and that helps prevent mistakes from escalating into disasters. When you’re not managing for quarterly earnings and you’re managing only for the long pull, you don’t give a damn what the next quarter’s earnings look like.” And this has proven to be advice that all investors can learn from.

Lessons from Yes Bank and Ola Electric:

Many speculative investors rely on technical charts using support and resistance patterns for trading decisions. This frequent buying and selling enriches brokers but rarely investors. Technical trading entices because it often is easier to look at a chart and feel that by glancing at past results you are able to predict the future, but this frequently proves to be incorrect. Fundamentals should always be a large part of investment decisions.

Yes Bank is a classic example. Investors assumed strong fundamentals in 2018, but allegations against founder Rana Kapoor revealed critical issues which proved to be damaging. The Reserve Bank of India stepped into the mess, forcing a consortium of banks to inject equity. Small investors who bought the dips blindly learned the cost of ignoring fundamentals and were hurt financially.
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Yes Bank Share Value from 9th of August 2018 to 9th of August 2019 in India Rupees

Another example unfortunately is Ola Electric Mobility Ltd which highlights a similar trap. Ola’s 2024 IPO raised 75 billion Indian Rupees ($900 million USD) at a value of 76 INR per share. It was hailed as a ‘BYD of India’, and despite high valuation warnings, investors pushed share value towards 160 INR. Predictably as cash burn mounted and with no operating profitability, Ola Electrical Mobility value soon fell below the IPO price and speculators who dreamed big soon began to feel like they had lost. The Yes Bank and Ola Electric Mobility cases demonstrate the dangers of investing outside one’s circle of competence.

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Ola Electric Mobility One Year Chart as of 17th September 2025

Valuations and Investor Behavior:

From October 2022 to October 2024, Indian markets moved significantly higher, stretching valuations beyond earnings. Even after U.S. Liberation Day tariffs triggered a pullback in India, investors continued pouring money into mutual funds through SIPs (Systematic Investment Plans), ignoring glaring fundamental problems. This raises concerns and creates doubts about whether SIP passive investing is wise without understanding individual businesses.

Investment becomes more intelligent when it is done with a business like approach. As Warren Buffett said, “the stock market is a device for transferring money from the impatient to the patient.” But patience should not mean overpaying for growth stories. Predicting future earnings is difficult, and paying lofty prices for stocks in the EV, battery, and micro-processing chip sectors based only on expectations can be dangerous.

When competition or innovation shifts, stock prices collapse as Ola Electric Mobility has shown. True investing is businesslike. It requires understanding, discipline, and buying below intrinsic values. Chasing hype, speculation, and every new IPO can lead to erosion of capital. Smaller investors can do better and they should desire to study fundamentals in order to make good decisions.

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India Insider: Working with the West as it Deals with Others

by with No Comment AMT MarketsFeatured HighlightsIndia

India Insider: Working with the West as it Deals with Others

India’s Prime Minister Narendra Modi visited Tianjin, China for the 2025 Shanghai Cooperation Organization Summit in early September, which was attended by over twenty nations. Before India visited the conference in August, Washington D.C had already imposed a 50% punitive tariff on India’s exports. The initial tariff was a 25% duty, but included another 25% penalty because India purchases a large amount of Russian Oil, which the U.S seeks to reduce. An uneasy trade dilemma looms for India.

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Many Western analysts quickly concluded that Prime Minister Modi was tilting India towards a stronger relationship with the Russian and Chinese camps, by potentially embracing warmer associations with Presidents Vladimir Putin and Xi Jinping, and defying Washington’s previous warnings.

Yet, the trade composition and the underlying reality highlights a different story. Despite India being positioned in the global South politically, the nation recognizes its higher value exports – which include textiles, gems and jewelry, apparel, and pharmaceuticals are primarily sold to the West. The United States clearly remains India’s biggest consumer. In essence President Trump holds a trump card.

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In contrast, China’s total exports to the global South (excluding Western Europe, Australia, New Zealand, and North America) has doubled since 2015. Chinese exports to the U.S were $525 billion USD in 2024, but to the global South, China’s exports grew to nearly $1.3 trillion USD.

As Professor Michael Pettis accurately points out, “countries with expanding trade surpluses with the U.S, use their higher revenues to fund deficits with the rest of the world.”

India Exports More to the West:

India’s trade surplus with United States, the European Union and U.K stands at $72.18 billion USD. If India wants to be competitive with China in terms of manufacturing, it should affiliate more astutely with the Western camp.

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Dependence on Anti-Western Countries Hurts India’s Trade Balance:

India’s combined trade deficit with Russia and China is approximately $158 billion USD, which demonstrates how much less India exports to these two countries. India’s overall merchandise trade deficit is $282 billion USD, with a deficit of almost 56% in total attributed to Russia and China.

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Service Exports a Crucial Metric in India’s Balance of Payments:

India’s services exports stood at $383 billion USD in financial year 2025, earned primarily from the U.S and other Western countries. Washington has imposed tariffs on India’s tradable goods sector, while the nation’s non-tradable sector has been operating without much stress.

India’s overall trade deficit stood at minus $94.26 billion USD in financial year 2025. Without service exports (predominately from the software services sector), India’s current account deficit would be much larger and the Indian Rupee would face greater depreciation pressures.

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India’s economic stability is precarious, equilibrium needs to be found. Solid domestic outcomes for manufacturing and a stable Rupee, including exchange rates, could be achieved with a well-defined calibration that looks West but does not weaken India’s stance as a non-aligned nation. New Delhi should focus on maintaining neutrality and strategic autonomy.

While India may shake hands with Presidents Vladimir Putin and Xi Jinping, an important economic lifeline runs firmly through Washington, Brussels, and London. Crucial negotiations are said to be taking place between Prime Minister Narendra Modi’s team and President Trump’s White House behind closed doors. New Delhi could become vulnerable if it does not find adequate solutions. President Trump has recently reiterated his friendship with the Prime Minister Modi, perhaps an agreement can be produced in the mid-term.

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India Insider: Women in Agriculture Need Manufacturing Power

by with No Comment Featured HighlightsIndiaInvesting

India Insider: Women in Agriculture Need Manufacturing Power

India has long been a society that has neglected Women’s Empowerment. While various states pursue proactive policies to enhance the role of women in society, their inclusion in the job market and ability to have financial independence is still lacking.

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Small Scale Farm in Tiruvannamalai, India

In the suburbs of Tiruvannamalai City, in Tamil Nadu, Mrs. Revathi runs an agricultural farm where she grows rice, flowers, and vegetables. She sells them to local commission agents or directly to customers from her farm. Mrs. Revathi, who lost her husband in 2019, has two daughters, both of whom are educated and working. One of the daughters is getting married. She said that although agriculture helps her family earn money, it does not lift them out of the poverty trap because of uneven flower cultivation. The land is becoming less and less suitable for irrigation – a matter that worries her greatly too. Flowers are one of the major sources of income for many farming families in Tiruvannamalai City in Tamil Nadu.

This is just a small example of the challenges faced by women working in agriculture.
According to recent Periodic Labor Force Surveys, 64.4% of women in India work in agriculture, compared to only 36.3% of men.

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Labor Workforce Percentage in India per Gender

Self employment and Access to Credit is not the Solution:

Many argue that self-employment and steady access to credit via microfinance institutions will help women become entrepreneurs and create movement up the social ladder. This is true in some cases, but many women struggle with raising families in their husband’s absence, and when working on farms where agricultural productivity is lopsided or unfit for growing vegetables or corn, times remain difficult.

First of all, why do women choose agriculture and remain small-time sellers? Because they are not able to find employment easily in formal sectors like manufacturing or other service oriented businesses.

Even within related agricultural sectors, women employed in vegetable processing plants, or value-added goods like masala manufacturing and tomato sauce production companies earn higher wages.

Unfortunately, low productivity and long spells of inactivity render agricultural workers significantly underemployed periodically. They are stuck, with nowhere else to go. Unlike in East Asian nations, which created mass employment through dynamic exports of manufactured goods, the Indian manufacturing sector’s low productivity makes it globally uncompetitive.

Manufacturing as a Solution for Women Empowerment:

Across Asia manufacturing has proven to be a powerful driver for upwards mobility. Incomes have risen, poverty has declined, and women are central parts of this transformation. In Vietnam, where a factory boom has been especially momentous, more than 68 percent of women and girls over 15 years of age are working for pay in some capacity, this according to data compiled by the World Bank. In China the rate is 63 percent, in Thailand 59 percent, and in Indonesia 53 percent of workers in manufacturing are women. Yet in India, less than 33 percent of women account for the workforce in recorded in official surveys.

In a pattern demonstrated in many industrializing societies, when more women gain jobs, families promptly invest further in education for girls. Manufacturing also lifts household spending power, fueling economic expansion that encourages investors to build more factories, providing additional jobs and reciprocal wealth creation. India is missing out on this dynamic manufacturing growth and is failing to broadly participate in the spread of improved industrialization which has helped bolster fortunes in many Asian economies and benefitted families. A vital component for a stronger Indian economy necessitates the empowerment of women.

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India Insider: K-Shaped Economy via Growth and Inequality

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

India Insider: K-Shaped Economy via Growth and Inequality

ndia’s growth story remains inspiring, supported by the National Democratic Alliance (NDA) government’s policies that attract foreign capital into infrastructure projects. The last decade has seen improvements in railways, ports, bridges and highways. In Financial Year 2025 (1st April 2024 to 31st March 2025), gross Foreign Direct Investment inflows reached USD 81.04 billion, a 14% rise from the previous year, reflecting global investor confidence under the China+ strategy. However, net FDI shrank to just USD 353 million, its lowest on record, as significant divestments and profit repatriations offset the inflows.

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Auto Sales in India from 1st of April 2024 to the 31st of March 2025

India’s stock market has rallied recently, driven by strong corporate performance despite tariff-related jitters. Corporate capital expenditures by listed non-financial companies rose over 20% year-on-year to exceed 11 lakh crore ($125 billion USD) in FY25, surpassing the government’s capital expenditures of 10.5 lakh crore ($120 billion USD). This signals robust investment by large firms.

In contrast, the unlisted corporate sector, contributing two-thirds of corporate value added and holding most corporate debt, remains weak with falling profits and tax payments. The divergence comes from the markets they serve: listed firms cater to higher-income households, while unlisted firms rely on low and middle income consumers, where progress and recovery is slower. Corporate tax receipts remain healthy, but are largely driven by listed firms. Collections in FY25 reached 12.72 lakh crore ($145 billion USD), while net direct tax collections climbed to 22.26 lakh crore ($254.97 billion USD).

Consumer trends mirror this imbalance. Passenger vehicle sales hit a record 4.3 million units, led by SUVs and luxury cars, while entry level cars and two-wheelers saw subdued demand. The aspirational middle class, especially tech professionals in their late 20s and 30s, drives premium demand, leaving the mass market segments of the population behind.

Nearly half of the nation’s workforce remains in low productivity sectors contributing only a fifth of national income. Wage growth is stagnant in several States. Micro, medium and small enterprises struggle with credit, policy bottlenecks, and institutional constraints. This is India’s K-shaped economy as large corporates and affluent consumers thrive, while smaller businesses and lower-income groups lag. India’s booming economy hasn’t delivered progress for all quite yet.

The country remains the fastest-growing major economy in the world, above 6%. A crucial question is whether this astonishing growth will create mass employment and better equality. Unfortunately, without updated consumer expenditures data since 2011–12 due to the lack of a recent census, policymakers rely on capital expenditure and earnings trends to gauge consumption patterns which deliver incomplete insights. The next census for India is scheduled to be conducted in 2027. More transparency is needed statistically to help alleviate the K-shaped results via the Indian economy.

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India Insider: Strategic Balancing Act Comes with Risks

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

India Insider: Strategic Balancing Act Comes with Risks

On the 15th of August, India’s Independence Day, Prime Minister Narendra Modi announced a large reduction on Goods and Services Tax rates to boost domestic consumption. The Indian economy is certainly slowing, this as lackluster domestic consumption has prompted the Reserve Bank of India to cut the repo rates from 6.5% to 5.5% in 2025.

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Indian Bonds 30 Year LPS Yields One Year Chart as of 19th August 2025

As trade deal discussions with Washington flounder, New Delhi is being forced to shift economic considerations towards China. The diplomatic relationship between India and China has grown colder, particularly since they clashed on the eastern border region in 2020.

Relying on China also comes with challenges for New Delhi. Since 2021, the trade deficit with China has expanded from $73.3 billion to $99.27 billion USD, showing that India still depends increasingly on China for significant importing needs.

According to Bloomberg, India’s major conglomerates have already established excellent relationships with Chinese suppliers of lithium ion batteries and EV components, although they try to discreetly tread under the radar in order to avoid the wrath of New Delhi government.

The fact is India can sustain its economy and maintain its geopolitical posture of non-alignment by practicing a multi-polar stance with Washington and Beijing. But despite clinching trade deals with the U.K and reviving trade negotiations with the E.U, New Zealand & Australia, and its deepening bilateral relationships with many central Asian nations and within BRICS, New Delhi’s major trading partner for exports remains the United States. Around 18% of India’s exports go towards the U.S, while 15% of imported goods come from China. The numbers do demonstrate an intriguing balance.

While India’s negotiations with the U.S have stalled and appear postponed indefinitely, other Southeast Asian countries, including Vietnam, Indonesia and the Philippines have secured lower tariffs with the Trump administration making them more competitive in the U.S. market. These nations are using the U.S for economic and military security, but they also rely on China for manufacturing and logistical needs.

India Faces Additional Challenges with Washington and Beijing:

Indian IT companies derive nearly 57% of their export revenues from U.S clients, making them heavily dependent on that market. And rapid advances in AI and the erosion of legacy outsourcing models are putting India’s traditional profit engines under pressure.

Meanwhile, China is not keen on helping India achieve expertise and manufacturing competitiveness which would threaten its own business model. China wants to make inroads by selling goods to the world’s largest consumer market, rather than technology transfers which would allow India to attain manufacturing supremacy.

Some economists warn that India’s own plans for mitigation of its current circumstances will likely be disinflationary. India’s bond results via yields clearly express concern about potential fiscal costs and difficulties. New Delhi’s focus has shifted towards appeasing domestic consumers, while trying to deal with uncertain foreign partners. Government capital expenditures have been declining since last year, signaling that both corporate and public investment confidence remains weak.

India’s neutrality is welcomed. It’s not anti-Western or pro-Western, and attempts to balance between the U.S and China while trying to forge new trade agreements and ties are a constant high-stakes game capable of creating strains economically and politically. The path forward with the U.S and China will remain complex and it must be worked on with precision in order to help achieve success.

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India Insider: Labor Productivity and Rising Household Debt

by with No Comment Featured HighlightsIndiaRisk Management

India Insider: Labor Productivity and Rising Household Debt

The desire for India to become a fast growing economy can be alluring, but without proper distribution of income and improved labor codes, this remains a major challenge to achieve. During coronavirus, acute problems were faced by those working in private enterprises. While some businesses and institutions supported their employees, many people were left behind without social protective measures.

According to Business Line newspaper analysis, from July 2022 to June 2023, an average salaried Indian male made 20,666 Rupees ($236 USD) and a woman made 15,722 Rupees ( $180 USD) per month.

Experience tells us that lower salaries in the rural areas are pervasive. Many private sector nurses, schoolteachers, and other service workers earn less than the international poverty line of $3 per day (around 250 Rupees per current Forex). Sometimes due to extensive workforce supply, some educated people must work blue collar service jobs additionally to make their ends meet.

Agriculture and Low Productivity:

Wage disparity and underemployment exists rampantly. Half of India’s labor force works in agriculture, where productivity is poor. In agriculture, farmers are both producers and consumers. There are barriers in food supply and demand for agricultural products. Farmers need access to local markets where their buyers can afford to purchase their produce. Without solid markets or better road infrastructure to reach them, many rural areas have less incentive to improve productivity.

As a result, many farmers produce low volumes. This is also one of the reasons why New Delhi is reluctant to permit U.S imports of agricultural and dairy products. Smaller farmers cannot afford to invest in education, which hinders their efforts to move into industries with higher wages. Without increasing labor productivity and better opportunities, most of the population will continue to work in agriculture.

Stagnant Wages, Informal Work and Problems in Micro-Finance:

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India’s Micro-Finance Lenders Culminative Returns Past Year

A large portion of the workforce is employed via informal and low-paying jobs. If wage growth does not keep pace with increased productivity, domestic consumption will remain weak, making the economy more fragile during global downturns. Drivers and gig workers provide some insights because of their inability to make ends meet. Minimum wage policies are lacking for many gig workers. Employees work higher hours in these enterprises. Yet another reason why Indian households prefer to prepare their children for government jobs.

India’s micro lending industry is under stress as delinquencies rise at an alarming pace. This has prompted the Reserve Bank of India to intervene and impose fines on lenders charging excessive interest rates. Loan disbursements shrank 13.5% year-on-year, and shares of some small finance banks have fallen, this as they have been forced to set aside higher provisions for bad loans.

Total loans outstanding in the industry are around 3.75 lakh crore rupees ($43 billion USD) in financial year 2025, with non-housing retail loans accounting for nearly 55% of total household debt. Small ticket loans were meant to ensure financial inclusion in underserved areas. The RBI defines microfinance as collateral-free loans to households with annual incomes of up to 3 lakh Rupees (approximately $3,400 USD).

But when wages do not rise in line with inflation, households begin to borrow to cover deficits, often at high interest rates. This creates risk for small finance banks when borrowers default, besides many consumers who are clearly struggling. A bank employee in Tamil Nadu has said loan disbursements are now scrutinized more closely, and applicants with monthly EMIs – equated monthly installments – above 10,000 Rupees ($115 USD) are no longer eligible for micro-loans.

Job creation in the Manufacturing:

Despite media portrayals of India’s manufacturing ascent, Harvard economist Dani Rodrik offered a compelling remark paraphrased here which points out obstacles ahead, ‘what made manufacturing a vehicle for transformational growth was its ability to generate productivity while drawing unskilled labor from traditional farming’. Rodrik seems to believe manufacturing remains a lower income sector in India due to its large work force and inability to transform efficiently, while also facing globalization problems from other Asian competitors.

The reason why manufacturing companies in India can pay lower salaries is because of high unemployment ratios and a steady supply of new graduates every year, making it easy to find new employees. Wages don’t see much improvement because workers are replaced easily. Many employees working in manufacturing actually have engineering and Masters’ degree backgrounds. Their average salary is around 15,000 Rupees a month ($170 USD), the same amount paid to low skilled employees who have technician diplomas.

India needs to work on improving core manufacturing capabilities, creating better infrastructure via land reforms and logistical capabilities. Implementing a fair minimum wage policy would also influence the economy via better household wages. Yes, inflation is a concern, but India’s aspiration to become a $10 trillion economy will remain hard to attain unless coordinated policy changes occur.

Notes: 1 USD = 87.5 Rupees

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India Insider: Manufacturing Strategy to Create Rural Jobs

by with No Comment BusinessFeatured HighlightsIndia

India Insider: Manufacturing Strategy to Create Rural Jobs

Across much of India’s rural landscape, manufacturing remains scarce and finding a solution for this remains a priority. While some towns do have small scale industries that offer jobs, this is still limited. As of financial year 2023, agriculture accounts for only 16% of India’s GDP, down sharply from around 35% in the 1990s, due to a structural shift toward services and manufacturing.

A large share of rural families still depend on agriculture, often engaging in farming and irrigation with modern equipment. However, marketing their produce remains a persistent challenge. Meanwhile, many rural workers are engaged in low-wage trade and commerce, often in informal settings such as small shops and roadside businesses. These roles typically offer limited income and little upward mobility. Falling real wages have pushed many to migrate to India’s urban centers or venture overseas to Singapore, Malaysia, and the Gulf countries in search of better livelihoods, aided by favorable exchange rates.

Capitalism and Efficient Manufacturing

Adam Smith, in his seminal work The Wealth of Nations wrote that, ‘it is not by gold or silver, but by labor that all the wealth of nations is created’. This fundamental idea underpins the modern economic thought that wealth is not derived merely from money, but from the productive capacity of people.

When capital is invested in a capitalist enterprise, it generates profits for the owner, provides wages for employees, and delivers returns (such as dividends) for shareholders. But this cycle of value creation depends on active and efficient enterprise, particularly manufacturing which has been missing or underdeveloped in many parts of rural India.

Unlike countries such as the United States, where people readily relocate across States, India faces some unique challenges. Like the European Union, India is a union of diverse linguistic and cultural regions. It is uncommon for a small business owner from Himachal Pradesh to directly access markets in Tamil Nadu or Karnataka due to language barriers, cultural differences, and logistical constraints. These frictions further isolate rural producers from wider markets.

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Garment Industry Values in India, Bangladesh and Vietnam

Strategic Solutions and the Role of State Governments

To revive rural economies, business people along with their state governments must identify and invest in strategic sectors that create jobs and add value. Kerala is a fine example: as one of India’s top spice-producing States, Kerala has the potential to establish local industries focused on spice processing, packaging, and export. Coordination between agriculture and manufacturing can generate employment, stimulate local economies, and enhance foreign exchange earnings.

Albert Hirschman, a development economist, highlighted this approach through his theory of unbalanced growth and economic integration. He argued that certain industries have strong reciprocal connections with other parts of the economy. By prioritizing sectors with good synergy potential, developing countries can achieve significant growth even with limited resources.

Growing competition from countries like Bangladesh and Vietnam which both enjoy favorable trade agreements do pose new challenges, this must be taken seriously by India and create a focus on forward looking international commerce. There will always be competition from distant enterprises and nations, this must be accepted and planned for via commercial insights.

Within India is Tiruppur, a city in Tamil Nadu, known as the ‘Manchester of South India’ due to its vibrant textile industry. The city has created an ecosystem of manufacturing that consistently offers higher real wages compared to other towns in the region. It has successfully shifted labor from agriculture to industry, thereby increasing productivity and income. It is a bright example and defines one way to make progress.

Protecting New Industries and Creation of Success

In his book How Rich Countries Got Rich and Why Poor Countries Stay Poor, economist Erik Reinert argues that nations develop not just by doing what they are currently good – such as agriculture or mining, but by nurturing industries that can become more productive long-term. Typically manufacturing and technology sectors lead to greater innovation and economic resilience.

Reinert provides numerous examples, like South Korea’s emerging growth in steel and its automotive industries, and Ireland’s rise in information technology where specific protections and support for young industries has led to long-term prosperity.

India’s rural transformation cannot rely on New Delhi alone. State governments along with business people must take the lead by identifying sectors that have the potential to foster high growth and employment. Helping to create local value chains, investing in infrastructure, training, and market access will build resilience in these communities. By encouraging small-scale manufacturing and leveraging regional strengths, the country’s rural areas can become engines of economic growth.

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India Insider: Concern IT Empire is at Risk in Age of AI

by with No Comment Artificial IntelligenceBusinessFeatured Highlights

India Insider: Concern IT Empire is at Risk in Age of AI

When China’s DeepSeek announced its Generative AI program as a rival to U.S based ChatGPT, the world paid close attention. In fact, Nasdaq bellwether stock Nvidia, the world’s most valuable company, took a hit because the DeepSeek product was made with less expensive chip processors compared to ChatGPT’s infrastructure, which uses Nvidia’s GPU technology.

In North America and Europe, DeepSeek’s rollout was met with much surprise and intrigue. And the true ‘poster child’ of India’s post-liberalization era, the IT (Information Technology) sector has been facing its own challenges and was also caught off guard. India’s IT sector employs some 5.3 million people and helps maintain its current account balance sheet by earning crucial foreign exchange reserves. The top four major IT companies have a combined market cap of $300 billion USD, larger than India’s richest man Mukesh Ambani’s Reliance Industries, which stands around $238 billion USD.

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Nifty IT Index One Year Chart as of 29th July 2025

India’s IT Business Model and Artificial Intelligence

Indian IT companies operate on a model of software servicing for offshore clients, typically via medium to long-term contracts. Their business operations are embedded across the globe thanks to affordable pricing and the quality of services provided by Indian software engineers. Now, this model is being threatened by the rise of Generative AI and taking it lightly would be a serious mistake by India.

Shares of major IT companies ­- TCS, Infosys, Wipro, and HCL have delivered lackluster returns since their post pandemic rally. Since Covid high valuations amid deal pessimism were a concern. Now those worries are amplified by AI and the disruption it brings to their business models. Software exporters remain the worst performers, the Nifty IT index is down 18% year-to-date, underperforming the broader index consequentially.

The recent release of Q1 fiscal year 2026 numbers from these four IT companies have been met with skepticism regarding forecasted outlook. Analysts noted that Indian IT firms are grappling with margin pressures amid persistent macroeconomic headwinds and rising threats from AI-driven productivity improvements. In response, companies have started to protect their margins with layoffs, TCS (Tata Consultancy Services) shed around 2% of its workforce this past weekend which could affect more than 12,000 jobs.

Time For India’s IT Sector to Become Proactive

Pricing models that IT companies charge customers are changing from long to short-term flexible contracts like ‘pay as you go’ over traditional fixed annual licensing models. Despite changing CEOs in several of these companies over the last few years, animal spirits are failing thus far to innovate AI products that can enhance the bottom line. Instead, companies prefer share buybacks and paying stellar dividends to appease the shareholders rather than to invest in R&D especially when their core model is under threat.

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Hang Seng Index One Year Chart as of 29th July 2025

The euphoria surrounding India’s $5.4 trillion equity market is cooling in 2025, amid concerns over slowing earnings growth, elevated valuations, and tariff related uncertainty. At the same time, sentiment towards Hong Kong’s listed Chinese shares are improving with global fund managers rapidly reallocating capital to that market. The Hang Seng Index has delivered an impressive 27% return year-to-date. Meanwhile, India’s stock market still lacks depth for investors seeking meaningful exposure to the booming Artificial Intelligence theme.

Indian IT companies excel at scaling and delivering AI solutions for global clients, but they do not own the core models, platforms, or consumer data needed to become true AI disruptors like China’s tech giants. The industry contributes approximately 7.5% to India’s GDP and remains the primary employment avenue for engineering graduates. It’s time for India’s IT sector to proactively address the growing AI threat posed by global competitors.

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India Insider: Booming GDP & Fragile Foundations of Growth

by with No Comment AMT MarketsCommoditiesFeatured Highlights

India Insider: Booming GDP & Fragile Foundations of Growth

India’s economic footprint on the global stage is expanding significantly each year. As the world’s largest democracy, the nation achieved a remarkable 7.4% GDP growth rate January to March of this fiscal year. Yet, beneath this impressive headline, job creation remains tepid, overshadowed by slowing foreign direct investments (FDI) and lower corporate investments from India’s domestic market.

Despite Prime Minister Narendra Modi’s initiative to attract manufacturing into India and boost jobs, the manufacturing share of GDP has stubbornly clung to 16% for the last decade. While India’s services sector accounts around 55% of GDP, the IT and allied services sectors contributes a mere 3-4% of total employment. Even after the last two decades in which India’s Asian neighbors have shifted labor force out of agriculture and into high scale manufacturing, 45% of India’s workforce still are employed in agriculture and aligned services constituting only 15-17% of GDP.

Speculative Capital, Excessive Credit and Rising Financial Risk

Between 2003 and 2023, India attracted approximately $275 Billion USD from foreign capital inflows, encompassing mostly equity and debt foreign portfolio investments. These capital injections are speculative in nature, primarily chasing returns in financial markets, rather than being directly invested into long-term productive infrastructure like manufacturing and export oriented industries.

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Foreign Portfolio Investment into India 2003 to 2023

Interestingly, India’s public sector banks especially between 2008 and 2015 aggressively lent to infrastructure, real estate and capital intensive projects. The state owned banks tried to fill the gap left behind by private investors. A substantial share of these loans later turned into non-performing loans, exacerbating a duel crisis as corporate and bank balance sheets came under severe stress within a few years. The government of India stepped in and injected 3.1 lakh crore Rupees ($45 Billion USD) to recapitalize the struggling banks, and also orchestrated mergers of weaker banks with stronger banks. India’s citizens helped cover these costs via higher taxes and hidden banking charges.

Reserve Bank of India: FX Reserves and Liquidity Dynamics 

As of financial year 2025, the RBI’S Foreign Exchange Reserves stand at around $696 billion USD. While a stronger reserve buffer is crucial for maintaining external stability, the Reserve Bank of India’s purchase of foreign currency to build reserves leads to problems with domestic Rupee liquidity and creates liabilities for the RBI’s balance sheet. Unless it’s not fully absorbed via Open Market operations, it will end up as excess liquidity in the banking system.

Post 2020 and the Covid19 pandemic, loose monetary policy and excess liquidity within the banking system has culminated with more reckless lending. Unsecured retail credit particularly in personal loans, credit cards and consumer finance is troubling. Non-banking financial companies (shadow banking) and fintech enterprises also expanded rapidly into this segment and now pose risks.

India Falling into Debt Trap 

Per a recent survey conducted by the RBI,  household financial savings have sharply declined to a five decade low of 5.1% of GDP in FY2023, down from 11.5% in 2021. Concurrently, household liabilities have risen, particularly in the unsecured credit segment.

Delinquencies in small ticket personal loans and “Buy Now, Pay Later“ programs are on the rise, prompting the RBI to intervene recently with tightening of personal loan norms in late 2023. This dynamic suggests that excessive credit creation, unaccompanied by productive or real income growth, is fueling a fragile boom in consumption backed predominately by debt especially among middle and lower income groups.

Lower Net Foreign Direct Investment amid Higher Repatriation

Even with coordinated efforts from the likes of Apple, Foxconn (Hon Hai Technology Group) and other electronics companies setting up facilities, and the assembly of manufactured goods like iPhones as part of the “China Plus“ strategy, a more comprehensive method of doing business and improved proactive FDI policy is needed. Overall results are still falling short. Evidence shows many companies continue to choose Vietnam and Mexico over India, which is clearly reflected in the lower net FDI figures in India’s Balance of Payments. In financial year 2024-25, net FDI fell 96% to $353 million USD, caused by a surge of money being repatriated out of India led by foreign companies, and also increased foreign investments by Indian companies to other nations, per the Hindu magazine.

The irony is that India needs foreign capital to finance its current accounts deficit, long-term capital investment would boost jobs and increase wages. As the central Indian government practices an austerity drive and its corporations show an unwillingness to invest, India needs higher foreign capital at this crucial juncture. How will India achieve this task? Without better employment and raising wages, India’s celebrated growth faces risks from underlying cracks.